Steady Demand from Developing Markets to Drive Growth in Passenger Cars Market
May 28, 2015
According to a recent report by Global Industry Analysts, Inc. (GIA), global sales of passenger cars are projected to reach 79.7 million units by 2020, driven by steady improvement in macroeconomic conditions and the subsequent rise in consumer demand, particularly in developing markets. The global automotive industry has come a long way since the mass production of Model-Ts. Technological advancements have transformed the automotive industry. Changing consumer preferences and a growing focus on safety and environmental benefits have played instrumental roles in the evolution of automobiles. The industry has seen the introduction of several automobile models over the years, from fuel-guzzling and power-packed models to lightweight, fuel-efficient and low-emission vehicles. Cars with advanced safety and comfort features are also growing in popularity.
Demand for passenger cars is primarily influenced by economic conditions dictated by GDP growth, changes in government policies, fluctuation in exchange rates and inflation levels. In addition, volatile fuel prices and the transportation infrastructure also tend to influence demand for passenger cars. After a long period of slowdown, global demand for passenger cars is expected to gain traction in the short- to medium-term period, driven by the improving economic outlook in the U.S. and developing markets. While India and China will continue to be primary markets for passenger cars in the short to medium term, emerging markets grouped under multiple acronyms such as CIVETS, MIST, Next 11, and MINT will sustain demand growth in the long term. Characterized by rapidly growing domestic consumption, a rising middle class, cheap labor, a large base of young, affluent and employed population unlike the aging, retiring baby boomers in developed countries, these countries will help supplement future growth in the world economy.
New vehicle models with high fuel efficiency and low emissions and those high on safety and comfort features will continue to gain traction in growth. Auto manufacturers are incorporating advanced systems such as intelligent driver assistance, in-vehicle communication and infotainment in passenger cars. In addition, digital entertainment is also attracting interest. With a major portion of time spent on traveling, automobiles are now gradually evolving into a natural extension of people’s digital lifestyle. With the automotive industry focusing on safety and reducing driver distraction, features such as hands-free Bluetooth communication, speech commands, and sophisticated touch input dashboard systems for easy access to maps, music/audio systems and navigation are emerging as critical variables influencing consumer purchase decision.
Electric and hybrid cars are expected to witness strong demand supported by numerous government programs designed to incentivize the development of infrastructure to support these vehicles and encourage consumer adoption. Consumer tax credits and research and development incentives, for instance, are helping boost demand for and commercial viability of electric cars. The focus on reducing petroleum dependence, propagation of environmental stewardship, and development of sustainable transportation infrastructure will help drive future gains in the market.
As stated by the report, Asia-Pacific represents the largest market worldwide. The region also ranks as the fastest-growing market with a compound annual growth rate (CAGR) of 6% over the analysis period from 2007-2013. Most of the passenger car demand in the region will be driven by China. Despite the stabilizing of the Chinese economy and its automotive industry, the country will continue to remain a major market for passenger cars in the coming years. The gradual sophistication of the domestic auto industry and growing consumer preference for luxury cars will be a key factor driving auto sales in the country in the coming years.
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